Choosing between an Asset Sale and Share Sale: What Buyers & Sellers Need to Know

If you’re buying a business in the UK, the two main procedures available to you are an asset sale and a share sale. Both have advantages and disadvantages, and the choice depends on personal and financial circumstances. Knowing the differences can help buyers make an informed decision.

In an asset sale, the buyer can choose which assets and liabilities to acquire, while in a share sale, the buyer takes on all assets and liabilities of the business. The asset sale allows the buyer to be more selective and minimise risks, while a share sale is a straightforward transaction.

Selling a business through an asset sale provides sellers with greater flexibility in selecting which assets to include in the transaction. On the other hand, a share sale offers a clean break and probable tax benefits. Asset sales can be problematic due to legal and contractual issues, while share sales may expose sellers to liabilities and require careful examination.

Buyers of an asset sale can enjoy the benefits of picking and selecting assets, while share sales can provide access to well-established brands and potential savings. Nevertheless, buyers must also deal with the complex legal and contractual issues involved in asset sales, including increased taxes and liabilities.

A share sale can be a good way for buyers to explore new markets, while sellers can benefit from a clean break, continuity, and tax relief. However, sellers must be aware of personal liability and lower prices due to risks, while buyers face due diligence requirements and indemnification risks. The process can be simplified by seeking legal guidance in mergers and acquisitions.

The decision between an asset sale and a share sale depends on factors such as control over assets and liabilities, tax implications, and the requirement for due diligence. Asset sales offer better control and reduced liability but can incur capital gains tax. Share sales give streamlined transactions, but comprehensive due diligence might be needed for any assumed liabilities. The final choice depends on the complexity of the business, the parties’ goals, and the negotiated terms. Professional guidance will be necessary for choosing the most suitable approach for specific circumstances and goals.

Thursfields is a full-service law firm specialising in commercial transactions, including mergers and acquisitions. Our experienced lawyers can offer practical solutions and have helped businesses in a range of sectors.  We can adapt to your goals and move seamlessly between commercial, employment, and real estate law. Contact us today on 0345 20 73 72 8 or read more about the differences between Asset Sale and Share Sale here.

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